Commentary and musings on the complex, fascinating and peculiar world that is securities regulation

Wednesday, June 16, 2010

House Agrees with Senate on SEC Self-Funding

The SEC is very likely to be granted self-funding in the conference bill that emerges from the ongoing House-Senate conference. During the conference session of June 16, the House acceded to the Senate provision (Sec. 991) providing for the SEC to become a self-funding organization. The House bill authorized more funds for the SEC, but did not provide for self-funding.

According to Rep. Paul Kanjorski, Chair of the Financial Institutions Subcommittee, Congress has grossly underfunded the SEC. Under self-funding, the SEC can raise its own funds at no cost to the general budget. It will be independent funding. Rep. Kanjorski said that Congress should oversee how SEC self-finding works and has the ability to call it back if self-funding is abused. Noting that six former SEC Chairs support self-funding, he said that self-funding is in line with a major goal of the legislation to change the culture and climate of the SEC. Rep. Kanjorski endorsed the strong leadership of current SEC Chair Mary Schapiro and urged Congress to give her the tools to do the job. In support of self-funding, Rep. Carolyn Maloney said that self-funding will give the SEC the resources to detect emerging market trends and market innovations.

The SEC is one of only a few federal financial regulators that must go through the annual Congressional appropriations process. Federal banking regulators such as the Federal Reserve and the FDIC, on the other hand, can use what they collect in fees, deposit insurance and interest income to fund their operations.

Legislation allowing the SEC to fund its own operations by using the transaction and registration fees it collects in place of a Congressionally-mandated budget would give the SEC access to millions more than is allocated through the Congressional appropriations process.